Mexican state oil giant Petroleos Mexicanos is looking at new technologies to turn some of its heaviest grades of crude into synthetic oil that could be used to supply the domestic refining network, according to a company presentation.

Venezuela and Canada have been upgrading bitumen and tar oil into lighter grades of synthetic crude for years to increase the value of the oil. With the production of Mexico's heaviest grades of crude on the rise, Pemex is looking at a similar options.

"Pemex Refining is very interested in technologies for obtaining synthetic crude oil from Ku-Maloob-Zaap," said Pemex engineer Francisco Toscano Martinez in a presentation earlier this month in Barcelona.

Adding crude upgraders to its domestic refining network would allow Mexico to process some of its cheapest grades of oil locally, leaving lighter grades of crude for the export market.

Ku-Maloob-Zaap, a group of oil fields where Pemex plans to increase production in the next few years, has a heavier grade of oil which is impossible to process at conventional refineries unless it is blended with lighter grades or upgraded at special facilities to make it lighter.

Upgraders remove salt, sand and water from low-quality crude grades and add hydrogen, producing a lighter, synthetic oil that can be processed into gasoline and other retail fuels at conventional refineries.

Pemex's refineries, at best, can refine crude oils with a gravity as low as 21 API. But much of the new production at Ku-Maloob-Zaap is a lot heavier, at 13 API or lower.

The gravity of crude oils is measured according to the American Petroleum Institute's formula, where lower numbers mean a heavier blend.

In 2007, Mexico produced 300,000 barrels a day of 13 API crude oil, which will increase to an average of 500,000 barrels a day over the next seven years, according to the presentation.

"Several tests are being carried out to determine if a synthetic oil can be used to feed our refineries," reads the presentation, delivered this month to the Global Refining Summit in Barcelona.

Pemex's refining network has a total capacity of 1.5 million barrels a day, but the company still imports 40% of the gasoline it sells. Mexican President Felipe Calderon is urging Congress to approve an energy reform bill that would allow private companies to invest in Mexican refineries under a system where Pemex would pay them a processing fee.

Mexico needs a new refinery every three to four years to phase out expensive gasoline imports by 2021.

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